FEDERAL COURT OF AUSTRALIA

 
Weimann v Allphones Retail Pty Ltd [2009] FCA 673

PRACTICE AND PROCEDURE – whether current proceedings should be converted to a representative proceeding – preconditions to s 33C of the Federal Court of Australia Act 1976 (Cth) made out – representative proceeding in this case would serve the administration of justice and enable a cheaper and more efficient means of resolving the dispute – leave granted to amend the application and statement of claim

Constitution, s 75, s 76, s 77

Airports (Business Concessions) Act 1959 (Cth)

Corporations Act 2001 (Cth), s 177(1A)(a)

Federal Court of Australia Act 1976 (Cth), Pt IVA, s 33C, s 33C(1), s 33C(1)(a), s 33C(1)(b), s 33C(1)(c), s 33N

Trade Practices Act 1974 (Cth), s 50, s 51AC, 51AC(3)(g),  s 80, s 80(1), s 82, s 87, s 87(1) s 87(2)(b)

Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth), s 29(2), cl 6B, c 10

Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17

Australian Gas Light Company v Australian Competition and Consumer Commission (No 2) [2003] FCA 1229

Bass v Permanent Trustee Company Limited (1999) 198 CLR 334

BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452

Bray v F Hoffmann-LA Roche Ltd (2003) 130 FCR 317

Bright v Femcare Ltd (2001) 188 ALR 633

Bright v Femcare Ltd (2002) 195 ALR 574

Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297

Draper v British Optical Association [1938] 1 All ER 115

Dormer v Solo Investments Pty Ltd (1974) 1 NSWLR 428

Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135

Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810

Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 3) [2008] FCA 967

ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248

IMF (Australia) Ltd v Sons of Gwalia Ltd (administrator appointed) (2005) 143 FCR 274

King v GIO Australia Holdings (2000) FCR 209

Marks v GIO Australia Holdings Limited (1998) 196 CLR 494

Melstrom v Garner [1970] 2 All ER 9

Pacific Brands Household Products Pty Ltd v Singan Investments Pty Ltd [2003] VSC 76

Re Clay, Clay v Booth  [1919] 1 Ch 66

Tobacco Control Coalition v Philip Morris (Australia) Ltd [2000] FCA 1004

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591

Wong v Silkfield Pty Ltd (1999) 199 CLR 255

NORBERT CHRISTIAN WEIMANN AS TRUSTEE FOR THE WEIMANN FAMILY TRUST NO 3 v ALLPHONES RETAIL PTY LTD

WAD 45 of 2009

BARKER J

23 JUNE 2009

PERTH

THE COURT ORDERS THAT:

1.                  The applicant has leave to file and serve an amended application including an application under Pt IVA of the Federal Court of Australia Act 1976 (Cth) in the form annexed to the affidavit of Idris Mark Owain Matthews, sworn 19 May 2009 and filed in support of the notice of motion filed 18 May 2009, with the further amendment that, at the end of paragraph 2(e) of the amended application, the words "in respect of these proceedings" be added.   

2.                  The applicant has leave to file and serve an amended statement of claim in the form annexed to the affidavit of Idris Mark Owain Matthews sworn 19 May 2009 and filed in support of the notice of motion filed 18 May 2009.

3.                   The respondent pay the applicant's costs of and incidental to the hearing of the applicant's notice of motion filed 19 May 2009.

4.                  The respondent have the costs thrown away by reason of the amendments.  

5.                  The respondent's notice of motion filed 4 May 2009 is dismissed.

6.                  Each party is to bear its own costs in relation to the dismissal of the respondent's notice of motion filed 4 May 2009.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

ISSUES

1                     There are two issues currently before the Court, by reason of the notice of motion dated 18 May 2009 filed by the applicant for leave to amend the current application and statement of claim in the proceedings, namely:

·                    Whether the current proceedings should be converted to a representative proceeding pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act).

·                    In connection therewith whether leave should be granted to amend the application and the statement of claim in the form of the minutes filed with the notice of motion in light of objections taken by the respondent.

background to notice of motion

2                     By application filed 30 March 2009, the applicant – who operates an Allphones franchise business in the Rundle Mall, Adelaide under a franchise agreement with the respondent dated 1 April 2004 – claims, on grounds stated in his accompanying affidavit:

1.                  An order that the applicant having given notice of exercise of the right to renew the franchise agreement, that agreement be specifically performed.

2.                  Declarations that upon the proper construction of cl 3 of the current franchise agreement:

•          the applicant is not obliged to execute the draft franchise agreement forwarded by the respondent to the applicant on or about 6 February 2009 in order to renew the current agreement.

•          the respondent is obliged to provide a franchise agreement in the same or substantially the same terms as the existing franchise agreement, save that the franchise agreement be for a term of five years commencing 1 April 2009, to the applicant for execution and to execute that agreement itself.

3.                  A declaration that the respondent in requiring the applicant to execute the draft franchise agreement has engaged in unconscionable conduct contrary to s 51AC of the Trade Practices Act 1974 (Cth) (TPA).

4.                  Alternatively to claim 2 an order pursuant to s 87(2)(b) of the TPA varying the effect of cl 3 of the current agreement so as to require the respondent to provide to the applicant and execute a franchise agreement in the same or substantially the same terms as the current agreement, save that the franchise agreement be for a term of five years commencing 1 April 2009, in circumstances where the applicant has given notice of its intention to exercise the right to renew the existing franchise agreement, such variation to take effect from the date of execution of the existing franchise agreement.

5.                  Damages for breach of contract, alternatively pursuant to s 82 of the TPA.

6.                  Interest on all damages awarded.

7.                  Further or other relief.

8.                  Costs.

3                     In the application, the applicant sought by way of interlocutory relief, amongst other things, an interlocutory injunction restraining the respondent from dealing with the applicant other than on the basis that the applicant has validly exercised the right to renew the current agreement and in accordance with the terms of that agreement until further order.

4                     On 6 April 2009 detailed directions were given by the Court to permit the filing of pleadings and the preparation of the proceedings for a trial which was then listed for an expedited hearing between 22 July and 31 July 2009, save for 28 July 2009.  These directions were made on the respondent's undertaking not to deal with the applicant other than on the basis that the franchise agreement remained valid and subsisting until further order (which undertaking was given by the respondent without any admission) and upon the applicant giving the usual undertaking as to damages in his own right and as trustee for the Weimann Family Trust No 3.

5                     The effect obviously of the undertakings of the parties was that the applicant was not obliged to elect to renew the franchise agreement under the option created by cl 3 of the current agreement, pending the determination of the proceedings.

6                     At the time this proceeding was commenced, the parties were well aware of outstanding issues between the respondent and a number of franchisees including the applicant and these were referred to in the applicant's accompanying affidavit (and are currently pleaded out in the statement of claim).  In particular, the parties were aware of the decision of the Court in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810.  The formal orders of the Court made in consequence of this decision were made on 16 June 2008 and are to be found set out in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 3) [2008] FCA 967.  This decision and these orders (currently under appeal) were also relevant to franchise agreements between the respondent and a number of its other franchisees. 

7                     Subsequently, in Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17, the Court granted an interlocutory injunction in the proceedings commenced by the ACCC up to and including the conclusion of the final hearing of the proceedings or until further order, that the respondent by itself, its officers, servants and agents be restrained from:

(a)        Representing that preferential treatment in relation to the allocation and supply of stock will be given to those Allphones franchisees who enter into the current version of the Revised Form of Franchise Agreement first adopted by Allphones in September 2007 (The New Franchise Agreement)… and/or who provide a binding release in favour of the respondent from all past breaches by the respondent of the franchise arrangements in existence between the respondent and such franchisees; or

(b)        In making allocations of stock (including withholding or rationing stock) to be delivered to its franchisees and to Allphones stores, in directing transfers of stock between Allphones stores and in supply stock to Allphones stores, taking into account in any way whatsoever as a criterion for carrying out any of the functions or activities enumerated above the fact that any franchisee:

(i)    has agreed to execute or is party to a New Franchise Agreement;

(ii)   has agreed to release or has released the respondent from past breaches of its franchise arrangements; or

(iii)  is party to a franchise agreement in a form in use prior to September 2007 (Old Franchise Agreement)

(emphasis in original)

8                     The current proceedings between the applicant and the respondent may be seen, in this light, to be a continuation of a general commercial dispute between the respondent and a number, if not all of its franchisees concerning the terms upon which current franchise agreements are to be renewed.

9                     The notice of motion to amend the application and statement of claim was supported by an affidavit of Idris Mark Owain Matthews sworn 19 May 2009 exhibiting the proposed amended application and statement of claim.

10                   It was also supported by the affidavits of Idris Mark Owain Matthews sworn 8 June 2009 and Robyn Aline Chew sworn 8 June 2009.

11                   An affidavit of Nicole Rosemary Bahn sworn 4 June 2009 was filed by the respondent in response.

12                   These affidavits identified the number of franchisees in a similar position to the applicant and the number whose right to renew their franchise agreements has not yet arrived, and addressed other recent dealings between solicitors concerning matters in dispute

13                   The applicant also relied on the supporting affidavit of Mr Matthews filed in support of the application.

14                   Following the hearing of the notice of motion on 9 June 2009, the solicitors for the applicant by letter dated 12 June sought to reopen the application and put on a further affidavit of a franchisee concerning alleged recent dealings with the respondent.  The application to reopen was opposed by the respondent.

15                   I refused the application to reopen.  I considered the notice of motion should be determined on the basis of the materials before the Court at the hearing, particularly the proposed amended application and statement of claim, and should not be the subject of continuing evidence concerning alleged recent dealings between franchisees, not the applicant and the respondent in relation to the representative proceeding point.

the nub of the current dispute

16                  The nature of the Old Franchise Agreement versus New Franchise Agreement issue may be appreciated by reference to cl 3 of the current franchise agreement between the applicant and the respondent pleaded in these proceedings, which is in these terms:

This Agreement shall commence on the date specified in the Schedule hereto and continue for the term specified in the Schedule hereto.  Provided that the Franchisee shall have properly performed its obligations under this Agreement and taken all action necessary to ensure that the Franchised Business conforms to the then System and Image, the Franchisee may renew this Agreement for the further term set out in the Schedule hereto.  The Franchisee shall inform the Franchisor of its intention to renew by giving written notice to that effect to the Franchisor no more than one hundred and eighty (180) days nor less than ninety (90) days prior to the expiration of the initial term of this Agreement.  Renewal shall be affected (sic) by the execution by the Franchisor and the Franchisee of the Franchisor's then current franchise agreement (save that this clause shall be excluded) and any other documents then used by the Franchisor in granting franchises.  No fee shall be charged for the renewal of this Agreement.

17                  It seems cl 3 is common to a number of existing franchise agreements.

18                  In essence, the respondent says that provided the preconditions concerning performance obligations and the taking of action that conforms to the then System and Image have been met, a franchisee such as the applicant is entitled to renew the agreement, but that in terms of cl 3, the renewal is effected by the execution of the respondent's "then current franchise agreement … and any other documents then used by the Franchisor in granting franchises".

19                  The respondent contends that it may therefore, if it chooses to do so,  propose renewal of the Old Agreement held by a franchisee on terms which are quite different from those in the current agreement, for example by the New Agreement (or variations of it).

20                  The applicant, and it seems a number of other franchisees, consider that cl 3 should be interpreted or construed to mean that the current agreement should be renewed without alteration or on terms that are the same or substantially the same as the current agreement, provided that the preconditions mentioned in cl 3 have been met.

21                  Further, the applicant, and it seems other franchisees, consider that the respondent has conducted itself in ways that are designed to unreasonably pressure the applicant, and other franchisees, to execute the "current franchise agreement" put forward by the respondent, in circumstances where a franchisee such as the applicant finds himself, herself or itself in the renewal period with little time to consider other options.  As a result, the applicant complains that the respondent has engaged in "unconscionable conduct" contrary to s 51AC of the TPA.

22                  The statement of claim in the current proceedings, that was filed by the applicant on 21 April 2009, pleads out his case in the following ways:

•          that the Old Agreement is subject to an implied term that the respondent, pursuant to cl 3 will provide a New Agreement "to the same effect as the Old Agreement": claim 6;

•          that if (which is denied) the respondent has the right to unilaterally vary the terms of the Old Agreement upon the exercise of the right to renew, it is an implied term of the Old Agreement that the respondent will exercise that right honestly, reasonably and in good faith: claim 7;

•          that the respondent did not provide a disclosure document to the applicant as required by cl 6B and cl 10 of the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth) (the Code): claim 8 and claim 9;

•          that the respondent by the notice of dispute it issued to the applicant following the judgment in Hoy Mobile, and the proceedings commenced by the ACCC represented that:

–          the ACCC had commenced proceedings against Allphones in the Federal Court of Australia alleging that the respondent's conduct towards those of its franchisees that had entered into the franchise agreement before September 2007 had been misleading, unconscionable and in breach of the Code;

–          the issues raised by the ACCC were similar to those dealt with by the Court in the Hoy Mobile proceedings;

–          the respondent sought to resolve those issues with relevant franchisees by way of negotiation and in the event that the negotiations were unsuccessful, mediation;

–          the respondent sought an outcome which involved the making of monetary payments to relevant franchisees, the entry into a deed of release and entering into a new franchise agreement;

–          the relevant franchisees could appoint another person to represent them in the negotiations and/or mediation;

–          where two or more relevant franchisees appointed the same person to represent them the respondent would deal with that representative in respect of the issues affecting all members of that group: claims 12, 13 and 14;

•          that on or about 28 September 2008 the respondent provided a copy of the New Agreement it wanted the relevant franchisees to execute: claim 15;

•          that the express terms of the New Agreement:

–          alters the rights of the parties under the Old Agreement;

–          is detrimental to the interests of the applicant;

–          benefits the respondent to an unreasonable degree in that its obligations to the applicant are less, alternatively no more, onerous than those made by the respondent under the Old Agreement: claim 16 and claim 17;

•          that the respondent on 12 September 2008, informed the applicant, in effect, that it would not negotiate with those franchisees who appointed solicitors Birch Partners to represent them in the negotiations proposed in the dispute notice: claim 18;

•          that on or about 28 September 2008 the respondent informed the applicant, in effect, that if he declined to execute the New Agreement following negotiations and/or mediation, the respondent would nonetheless require him to execute an agreement in terms of the New Agreement in the event he exercised the right to renew the Old Agreement: claim 19;

•          that the respondent engaged in [pleaded] conduct in order to coerce relevant franchisees including the applicant both directly and through their knowledge of the respondent's conduct towards other franchisees, to execute the New Agreement: claims 20 – 24;

•          that on 1 December 2008, the respondent advised the applicant, amongst others, in effect, that it did not intend to enter into any further negotiations regarding the terms of the New Agreement: claim 25;

•          that the applicant gave notice of intention to exercise the right to renew the Old Agreement on 14 December 2008: claim 27;

•          that on or about 6 February 2009, the respondent provided an agreement in terms of the New Agreement to the applicant for execution and informed the applicant that it required him to execute that agreement in order to renew the Old Agreement: claim 28;

•          on or about 18 February 2009, the respondent, in effect, informed the applicant that it would not engage in a mediation proposed by its earlier dispute notice other than on an individual basis with franchisees: claim 29;

•          on 20 March 2009, the applicant issued a notice of dispute to the respondent in relation to the matters pleaded in claim 29, concerning the alleged refusal of the respondent to engage in the mediation process other than on an individual basis, purportedly pursuant to the Old Agreement: claim 30.

23                  As a result of these pleaded matters, the applicant says that:

•          The respondent engaged in conduct designed to coerce the applicant to sign an agreement in terms of the New Agreement irrespective of whether it had an enforceable right to require him to do so.

•          The respondent failed to provide to the applicant an agreement for execution in accordance with the terms of the Old Agreement.

•          Alternatively, if the respondent has a right to unilaterally vary the terms of the Old Agreement upon renewal, the provision by the respondent of the New Agreement for execution is unreasonable and not in good faith.

•                      The conduct of the respondent is unfair.

•          The conduct of the respondent is in breach of cl 29(2) of the Code.

•          The respondent has acted in bad faith in engaging in the conduct leading to the requirement that the New Agreement be signed.

•          The conduct complained of is conduct in trade and commerce which is unconscionable and in contravention of s 51AC of the TPA.

the representative proceeding application

The requirements of the Federal Court Act

24                  By its notice of motion, dated 18 May 2009, the applicant seeks to amend the application and statement of claim and convert the proceeding into a representative proceeding.

25                  Section 33C(1) of the Federal Court Act sets out the preconditions to the bringing of a representative proceeding by one or more persons as representing some or all of them, namely:

(a)        7 or more persons have claims against the same person; and

(b)        the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and

(c)        the claims of all those persons give rise to a substantial common issue of law or fact;

26                  Section 33C(2) further provides that:

(2)        A representative proceeding may be commenced:

(a)     whether or not the relief sought:

(i)      is, or includes, equitable relief; or

(ii)      consists of, or includes, damages; or

(iii)     includes claims for damages that would require individual assessment; or

(iv)     is the same for each person represented; and

(b)     whether or not the proceeding:

(i)      is concerned with separate contracts or transactions between the respondent in the proceeding and individual group members; or

(ii)      involves separate acts or omissions of the respondent done or omitted to be done in relation to individual group members.

27                  While there is some considerable authority on the proper interpretation of the words used to establish the preconditions to the bringing of a representative proceeding, what is plain enough is that the introduction of Pt IVA into the Federal Court Act was meant to facilitate group or class actions so that, in appropriate cases, the claimants would be able to obtain remedies "more cheaply and efficiently" than might be the case with individual actions: see Australia, House of Representatives, Parliamentary Debates (Hansard) 14 November 1991 at 3174 - 5; Wong v Silkfield Pty Ltd (1999) 199 CLR 255.

28                  It is also plain enough, and the authorities on the point are now many, that the words or expressions used in s 33C(1) in laying out the preconditions to a representative proceeding are of fairly wide import and not restricted.  For example, in Bray v F Hoffmann‑La Roche Ltd (2003) 130 FCR 317 the Full Court emphasised that the word "claim" should not be equated with "cause of action" or "remedy": see Carr J  at [113]; Finklestein J at [244].  Finklestein J at [245] suggested that:

The better view, in my opinion, is that the word means, in this present context, the facts which give rise to the action as well as to the legal basis of the action.

29                  What is important to note, though, is that seven or more persons "have claims against the same person".  And that the claims "are in respect of, or arise out of, the same, similar or related circumstances".  And, finally, that the claims give rise to "a substantial common issue of law or fact".  In King v GIO Australia Holdings (2000) FCR 209, Moore J at [30] summed up these requirements in the following terms:

There is a clear requirement in s 33C(1)(a) that the group members must have, if there is one respondent, a claim against that respondent.  That is, each member must have a claim against that respondent.  However, it is equally clear that the claim, for the purposes of s 33C(1)(a), need not result in the same relief (s 33C(2)(a)(iv)), need not be based on the same conduct of the respondent (s 33C(2)(b)(ii)) and may arise out of different transactions with the respondent (s 33C(2)(b)(i)).  What the claims must have as unifying characteristics to permit their prosecution under Pt IVA is that they are founded in the same, similar or related circumstances (s 33C(1)(b)) and give rise to a substantial common issue.  The common issue can be either of fact or law (s 33C(1)(c)).

30                  The question as to what it means for the claims of the relevant persons to "give rise to a substantial common issue of law or fact" was considered in Wong 199 CLR 255.  At 381, the Court (Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ) explained that the term "substantial" may have various shades of meaning.  Having regard to the purpose of the enactment of Pt IVA, namely not to narrow access to the new form of representative proceedings beyond that which applied under earlier regimes, the Court, at [28] suggested that:

when used to identify the threshold requirements of s 33C(1), 'substantial' does not indicate that which is 'large' or 'special significance' or would 'have a major impact on the … litigation' but, rather is directed to issues which are 'real or of substance'.

31                  However, the fact that a proceeding might properly be commenced as a representative proceeding under s 33C, because it discloses claims that give rise to "a substantial common issue of law or fact" does not mean that a proceeding may not later be discontinued as a representative proceeding under s 33N(1): see Wong 199 CLR 255 at [29].

32                  In that regard, the Court at [33] appears to have accepted the observation of Spender J at first instance, that:

There will always be a large degree of evaluation concerning commonality and non-commonality of issues and ultimately, if because of the extent of non-common issues, representative proceedings in the assessment of the court are not the preferable means of dealing efficiently and effectively with the claims, the court will no doubt terminate the representative nature of the proceedings in the exercise of the discretion conferred by s 33N(1)(d) of the [Act].

33                  In Bright v Femcare Ltd (2001) 188 ALR 633, Stone J accepted that the representative proceeding should not be dismissed for failure to meet the criteria set out in s 33C, but considered the existence of non‑common issues should lead to an order being made under s 33N.  However, in Bright v Femcare Ltd (2002) 195 ALR 574, the Full Court allowed an appeal against that decision.  In doing so, the Full Court considered the Court had, amongst other things, wrongly identified as "not common" various questions which were in fact common and had failed to take account of the fact that various questions, whilst not common to every member of the group, were common to a substantial number of subgroups.  The Full Court considered these objectives of s 33C would not be frustrated but advanced by maintaining the action as a representative action.

The Amended Application and Statement of Claim

34                  In the proposed amended application to convert the current proceedings into a representative proceeding, claim 2 proposes that:

2.         the group members to whom the proceeding should relate are those persons who in respect of a territory:

(a)   are or, prior to expiry of their most recent franchise agreement, were franchisees to whom the respondent had granted a franchise to operate a business under the name comprising or including the word 'Allphones'; and

(b)   have or, prior to its expiry, had a franchise agreement in the same or substantially the same terms as the applicant's franchise agreement dated 1 April, 2004 (… the Old Agreement …) containing a right to renew in the same or substantially the same terms as the Old Agreement; and

(c)   for whom the time permitted by that provision for exercise of their right to renew has not expired or has not expired without him, her or it giving to the respondent notice of intention to renew under that provision; and

(d)   have not yet signed a renewed franchise agreement; and

(e)   have entered into a costs agreement with the applicant's solicitors prior to the date of filing the amended application.

35                  It is apparent from these opt‑in criteria that franchisees who, like the applicant, are within the period specified in the Old Agreement for exercising their option to renew the agreement (who may for ease of reference presently be called group A members), as well as franchisees who are not within that period but who are affected by an Old Agreement and will in due course find themselves having to decide whether or not to exercise the option to renew the agreement (who may be called group B members), may be within the group.

36                  As a matter of fact the parties accept that there currently would be seven group A members, and some 28 group B members.   However, by the time of trial some group B members may have become group A members.

37                  So far as the details of claim are concerned, the proposed amended application expands upon, and in some respects deletes, causes of action or remedies previously sought, as follows.

38                  Claim 3.1 of the proposed amendment is for the applicant's benefit and seeks specific performance of the Old Agreement, notice of exercise of the right of renewal having been given and seeks that the Old Agreement be "carried into effect" by the parties executing a franchise agreement upon the terms of the Old Agreement as declared by the Court.  Despite some changes, claim 3.1 is substantially in the same terms as claim 1 of the current application.

39                  Claim 3.1A of the proposed amended application is for the benefit of all group members and seeks a declaration in the following terms:

A declaration that upon each group member … giving notice under the option to renew provided for in his, her or its Group Member's Old Agreement with the respondent, the respondent is obliged to execute and tender to that group member for execution a further franchise agreement for the renewed term … (excepting the option to renew), as declared … herein by this honourable Court … and (where such notice has been given prior to the final hearing and determination of this matter) that such option agreement ought to be specifically performed and carried into effect and Orders accordingly.

This declaration is new but reflects claim 3.1 and seeks to extend the remedy to all group members.

40                  Claim 3.2 of the proposed amended application is for the benefit of the applicant and reflects claim 2 of the current application but also relies on "the events which have happened" and adds a further subparagraph, in the alternative, as follows:

3.2.3          alternatively, and in the event that the Court finds that the respondent is entitled in accordance with prayer 3.12 hereof, then a declaration that the Respondent is obliged to execute and provide to the applicant for execution a franchise agreement in those terms for a term of 5 years commencing 1 April, 2009. 

41                  Claim 3.12 of the proposed amended application includes an alternative claim that the applicant is entitled to a declaration that the obligation of the franchisor and the franchisee upon due exercise by the franchisee of the right to renew the term of the Old Agreement is to execute a further franchise agreement upon the same terms (except as to the right to renew) save that:

•          where there is at the time of expiry of the original term a revised form of franchise agreement;

•          which has achieved currency through acceptance by the respondent and its franchisees;

•          which is not inconsistent with the right to renewal for the further term and same territory stated in the agreement;

•          which upon a fair and reasonable reading amounts in substance to a renewal of such an agreement for the further term, notwithstanding such reasonable and inessential variation as can fairly be attributed to adjustment to provide for proper changes made during the original term in the System or Image defined in such agreement;

•          which contains terms differing from those of such an agreement which have been introduced by the respondent in good faith and for the proper purpose of maintaining or improving the franchise System and Image;

•          which does not vary from the terms of such agreement for the original term in a manner oppressive to that franchisee or to franchisees generally; and

•          then and only then may the respondent stipulate for the franchise agreement for the renewed term to be executed upon the terms of that revised form of franchise agreement.

The additions of claim 3.2.3 and claim 3.12, on the face of it, seek to raise an issue by way of construction of all Old Agreements held by all franchisees, whether falling into group A or group B, in the alternative circumstance that there is no general obligation under the Old Agreement to renew the agreement to the same effect as the Old Agreement by way of primary obligation.

42                  The proposed amended application introduces a new claim 3.2A for the benefit of all group members which seeks declarations in similar terms to claim 3.2.  However, they differ from the declarations sought in claim 3.2 in that the declarations claimed in proposed claim 3.2 are said to arise upon the proper construction and effect of the Old Agreement "and in the events which have happened".  Clause 3.2A seeks declarations upon the proper construction and effect of the Old Agreement and upon due exercise of the right to renew, but there is no reliance for the purposes of those declarations on "events which have happened". 

43                  Claim 3.3 of the proposed amended application is for the applicant's benefit and seeks a declaration that the respondent has engaged in unconscionable conduct, contrary to s 51AC of the TPA.  This is in terms virtually identical to claim 3 of the current application.

44                  Claim 3.3A of the proposed amended application is for the benefit of all group members and seeks a declaration in similar terms to claim 3.3.

45                  Claim 3.4 of the proposed amended application in the alternative would seek an order for the applicant's benefit, pursuant to s 87(2)(b) of the TPA, varying the effect of cl 3 of the Old Agreement so as to require the respondent to provide to the applicant and execute a franchise agreement in the same or substantially the same terms as the Old Agreement.  This claim is in similar terms to that made in claim 4 of the current application.

46                  Claim 3.4A of the proposed amended application is in terms similar to claim 3.4 and is for the benefit of all group members.  It would extend the relief under s 87(2)(b) of the TPA, in the alternative, to all group members.

47                  The claims previously made for damages for breach of contract, or in the alternative pursuant to s 82 of the TPA, and interest on all damages are deleted from the proposed amended application.

48                  Claim 3.9 of the proposed amended application and following are new claims, which are made for the benefit of all group members.  Claim 3.9 seeks a declaration that upon the true construction and effect of the applicant's Old Agreement and the Old Agreement of each group member there is a right of the franchisee to renew such an agreement upon giving due notice.

49                  Claim 3.10 claims a declaration that upon the true construction and effect of each of the Old Agreement and group members' Old Agreements, the provision made by the fourth sentence of cl 3 is "repugnant" to the right to renew and therefore void and of no effect.  The impugned sentence is that which provides for renewal to be effected by the execution of the franchisor's "then current franchise agreement".

50                  In the alternative, claim 3.11 claims a declaration that upon the true construction and effect of each of the Old Agreement and group members' Old Agreements, the provision made in the fourth sentence is void as an agreement to agree on essential matters or, alternatively, for uncertainty, or, alternatively, as supplying an "illusory consideration".

51                  Claim 3.12 (referred to above) claims in the alternative, a declaration that upon the true construction and effect of each of the Old Agreement of the applicant and the group members' Old Agreements, the obligation of the franchisor and the franchisee upon due exercise by the franchisee of the right to renew the terms, is to execute a further franchise agreement for the further term provided by such agreement and otherwise (excepting the right to renew) upon the same terms as such agreement, save that:

•          where there is at the time of expiry of the original term a revised form of franchise agreement;

•          which has achieved currency by being generally accepted by the respondent and franchisees;

•          which is not inconsistent with the right to renew for a further term and for the same territory;

•          which upon a fair and reasonable reading amounts in substance to a renewal of such agreement for the further term, notwithstanding such reasonable and inessential variation as can fairly be attributed to adjustment to provide for proper changes made during the original term to the System or Image defined in such agreement;

•          which contains terms differing from those of such agreement which had been introduced by the respondent in good faith and for proper purpose, being the purpose of maintaining or improving the franchise System and Image;

•          which does not vary from the terms of such agreement in a manner oppressive to that franchisee or to franchisees generally; and

•          then and only then may the respondent stipulate for the franchise agreement for the renewed term to be executed upon the terms of that revised form of franchise agreement.  This a new claim that does not appear in the current application.

52                  Claim 3.13 claims orders pursuant to s 80 of the TPA restraining the respondent from requiring or seeking to require the applicant or all group members to execute franchise agreements in or substantially in the form of the New Agreement submitted to the applicant.

53                  Claim 3.14 claims orders pursuant to s 80 of the TPA restraining the respondent from dealing with each of the applicant and other group members who have given in due time, due notice of their intention to renew the Old Agreement, upon any footing other than that he, she or it is entitled to and has a franchise agreement for the renewed term otherwise on the terms declared or ordered.

54                  The applicant states in the proposed amended application that the questions of law or fact common to the claims of the group members are:

1.                  What is the true construction and effect of the renewal clause of the Old Agreement?

2.                  Is the fourth sentence of cl 3 of the Old Agreement valid and effectual?

3.                  To what extent, if at all, does the Old Agreement permit the respondent to require a franchise agreement for the renewed term pursuant to the exercise of the rights of renewal to contain terms that are new or different from the terms of the franchisee's franchise agreement for the original term?

4.                  Could it ever be permissible under the terms of the Old Agreement for the respondent to require a renewing franchisee to accept terms in the form of the New Agreement submitted to the applicant or substantially in that form?

5.                  If yes to (4), is or can it be permissible under the terms of the Old Agreement and in the events which have happened for the respondent to require a renewing franchisee to accept terms in the form of the New Agreement submitted to the applicant or substantially in that form?

6.                  If yes to (5), is or would it be a contravention of s 51AC of the TPA for the respondent to make and insist upon that requirement?

7.                  If so, should the Court grant relief under s 87 or s 80 of the TPA to vary a franchise agreement to restrict the respondent's right to make or insist upon that requirement, or to restrain the respondent from making or insisting upon that requirement?

The Parties' positions

55                  The applicant by its notice of motion filed 18 May 2009, seeks leave to file and serve an amended application including an application under Pt IVA of the Federal Court Act.

56                  The respondent by notice of motion filed 4 May 2009, had earlier given notice of its intention to apply for orders that a number of paragraphs of the current statement of claim, filed 21 April 2009, be struck out and that there be consequential amendments to other paragraphs.

57                  The respondent says that in light of the move by the applicant to amend the current application and statement of claim the applicant has effectively abandoned any reliance upon the current statement of claim.  In effect the strike out application of the respondent has been superseded by these developments.  Nonetheless the respondent maintains that the proposed amended application and statement of claim remain defective and that leave to amend should be refused.

58                  The respondent opposes the applicant's notice of motion for leave to file an amended application and statement of claim on the grounds that:

•          those potential group members who have yet to exercise a notice to renew their franchise agreement (group B members) do not yet have a "claim" against the respondent for the purpose of s 33C(1)(a) of the Federal Court Act; 

•          further, and in the alternative, group B members do not have a tenable cause of action and leave to advance such claims should be refused;

•          leave should not be permitted while the pleadings remain defective in form.

59                  The respondent notes that the proposed amendments to the proceedings involve distinct claims by the applicant on his own behalf and on behalf of the proposed group for:

•          declaratory relief as to the meaning and operation of the right of renewal as contained in cl 3 of the Old Agreement;

•          a claim for unconscionable conduct for the purposes of s 51AC of the TPA which turns upon the respondent enforcing its legal rights so as to compel the exercise of a right of renewal in terms of the "then current franchise agreement";

•          however, the amended claim abandons a claim for damages and no loss or damage is pleaded.

60                  The respondent submits that as a consequence the proposed amended claim is expressly premised upon any loss or damage only being suffered in the event that a dispute should arise as to the appropriate form of the franchise agreement should a notice of renewal be given.

61                  The respondent says that in the case of many of the group B members, the right of renewal cannot be exercised for a period of some years and any dispute as to the meaning of the franchise agreement cannot arise until that time.  On a similar note, any potential loss or damage cannot arise until that time.

62                  The respondent draws attention to that portion of the amended claim that proceeds on the premise that group members' claims arise in the event that the "then current agreement" is in the form of the new franchise agreement provided to the applicant, but that the evidence put before the Court to date shows that the franchise agreement is under continuing review and is frequently updated, including subsequent to the document given to the applicant. 

63                  The respondent therefore submits that, to that extent, the Court is seemingly asked to proceed on the assumption that the franchise agreement will remain effectively static in the period between now and 2012 when some of the potential group members will first be entitled to exercise their right of renewal.

64                  Counsel for the respondent accepts that there is a material difference in considering the application for leave to amend the application and statement of claim between the position of those franchisees, the group A franchisees, who have, like the applicant exercised the option to renew within the relevant period prior to the expiration of the current agreement, and those other franchisees, the group B franchisees, for whom the period in which the right to renew their current agreements will not arise for some years, for example in the period 2010 – 2012.

65                  It is in respect of the group B franchisees that the respondent contends that there is no current "claim" against the respondent sufficient to be included within the total group contemplated by the representative proceeding application.

66                  More particularly, the respondent contends that in respect of the group B franchisees:

•          There is no justiciable controversy between the respondent and those franchisees, and any application for declaratory relief sought in relation thereto is merely hypothetical.

•          Unless and until those franchisees exercise the right of renewal and are required to execute a document in the form of the franchise agreement "forwarded to the applicant on or about 6 February 2009", as claimed in amended application claim 3.4A such franchisees will have not suffered nor are likely to suffer loss or damage and are therefore unable to obtain relief under s 87(2)(b) of the TPA.

•          The relief sought under s 80 of the TPA is expressly confined to those group members who have given notice of intention to renew their franchise agreement: see proposed amended application at claim 3.14.

67                  The respondent points out, as indeed is the case, that in the case of group B members the right of renewal is not capable of being exercised until some future date, in many instances in the period 2010 – 2012, and that the right of renewal, being in the nature of an option in favour of the franchisee, may in fact never be exercised.

68                  Further, the respondent says the right to renew is qualified in that it only arises under cl 3 if the relevant franchisee has "properly performed its obligations… and taken all action necessary to ensure that the Franchised Business conforms to the then System and Image".

69                  Additionally, the respondent says that, even if the right to renew is available and exercised by group B members in the future, it is far from self evident that a dispute will arise between that particular franchisee and the respondent as to the applicable form of the franchise agreement in, say, one, two or three years time.  By that time the parties could have the benefit of the Court's ruling on the proper construction of the agreement.

70                  The respondent then emphasises that because the cl 3 renewal is by reference to the respondent's "then current" agreement, and the agreement will change over time, at the time group B members come to exercise the rights to renew, the agreement may be in a form quite acceptable to them, even if the form currently put to the applicant is not widely accepted by franchisees.

71                  As to the objection that the group B members do not have a relevant "claim" to press against the respondent and that there is no justiciable controversy, because the controversy is hypothetical, the applicant points to its allegation that on or about 28 September 2008 the respondent sent to all franchisees who were on the Old Agreement material asserting that when any person renewed his, her or its agreement they would be put onto the so called New Agreement.

72                  The applicant characterises the conduct and related dispute resolution process initiated by the respondent and pleaded in the proposed statement of claim, as a "threat", and a threat that the renewal clause does not permit. 

73                  The applicant says this is because part of cl 3 is repugnant to the main provision and therefore void, or, because such power as the respondent may have to require adherence to "current" terms, cannot extend to require adherence to an agreement in the form of the "New Agreement" or to any of its various permutations, or because the course that the respondent has been taking and continues to take shows that it is not acting bona fide and for proper purposes.

74                  So far as the respondent's contention that the group B franchisees have not suffered nor are likely to suffer any loss or damage and are therefore unable to obtain relief from s 87(2)(b) of the TPA is concerned, the applicant says that the threat has been made and continuously made against them that the respondent will seek to force them onto the "New Agreement".  They say this in the circumstances would also be unconscionable.  The applicant says that if the renewal clause permits this to happen it should be modified under s 87 and/or that the respondent should be restrained by an order under s 80 from continuing with this behaviour.  This relief either way relates to the contracts that now exist, and not some future new agreement.

75                  The applicant says that because of the current conduct and course of conduct by the respondent designed to see franchisees enter into the New Agreement, the dispute as to what the contract between all franchisees and the respondent means for the current justiciable dispute, is not a hypothetical one.  Accordingly, it is not necessary for the group B franchisees to be required to wait until the time they choose to exercise their option to renew the agreement before they can seek relief against the respondent.

Consideration Concerning Representative Proceeding

76                  As to the applicant and other franchisees who fall into the group A category described above, namely those franchisees who have actually exercised the cl 3 option to renew their franchise agreements, it is plain enough, in terms of s 33C(1) that there are:

•          Seven or more persons who have claims against the same person, namely the respondent.

•          The claims of all those persons, as franchisees, are in respect of, or arise out of, the same, similar or related circumstances namely, the insistence of the respondent that it can require these franchisees to execute a new franchise agreement in terms different, even substantially different, from the current agreement under which each operates their franchise.

•          The claims of all the franchisees in this group A category give rise to a substantial common issue of law or fact, the primary common issue of law being the proper construction of cl 3 of the Old Agreement.  In that regard, the questions posed in claims 4(a), (b), (c), (d) and (e) of the proposed amended application reasonably identify substantial common issues of law that the persons' claims give rise to.

•          There also appears to be a substantial common issue of fact or issues of fact concerning whether the conduct of the respondent towards these franchisees as a group constitutes unconscionable conduct.

77                  Indeed the respondent, leaving aside its specific pleading objections to the amended statement of claim and relief sought in the proposed amended application, does not contend that the preconditions to a representative proceeding are not made out in respect of the group A franchisees. 

78                  Accordingly, I find that so far as the group A franchisees are concerned the preconditions to a representative proceeding specified in s 33C of the Federal Court Act  are satisfied.

79                  The real issue between the parties is whether or not the s 33C preconditions are made out in respect of the group B franchisees, that is to say, those franchisees who in broad terms operate under a current franchise agreement which contains cl 3 of the Old Agreement or its equivalent, but for whom the time has not yet arrived to exercise the option to renew the agreement.  As stated above, the facts show that there are a much larger number – 28 or so – franchisees in this group B category.  In some cases, the time to exercise the option to renew the agreement will not arrive until some time in the period 2010 to 2012.

80                  For my part, I consider that these persons do in fact have relevant "claims" against the respondent.  In my view it matters not, in the present circumstances, that these persons do not currently have the contractual right to exercise the option to renew the agreement under which they operate their franchise.  Their current interests raise real issues with real consequences depending on their resolution.

81                  Having regard to the general level of dispute between all franchisees, and particularly those in the group A category, the franchisees in the group B category are entitled to entertain real concerns concerning their legitimate contractual rights at this time.  In that sense, the contractual concerns of the group B persons are not merely hypothetical.  The issue of concern has already been identified as such by the position taken by the respondent with the group A franchisees.  The applicant says there is no reason to believe, given the background to the proceedings set out above including the prior proceedings in the Federal Court involving the respondent, that the respondent's approach to the renewal of the franchise agreements of the group B members is likely to be any different from that currently evinced in relation to the group A franchisees.  In my view, this observation has force.

82                  The respondent contends that the "current franchise agreement" of the respondent, that it currently requires a franchisee to execute upon renewal of the agreement, has changed overtime and will continue to change, thus there is no particular agreement in respect of which litigation may occur.  The point of the representative proceeding, however, is that the franchisees, as a group, who currently have an Old Agreement, have a common interest in seeing the contractual entitlement they have under cl 3 properly interpreted or construed.  Whatever the terms of cl 3 mean, they currently mean the same thing in respect of all franchisees who operate under the Old Agreement.  It matters not whether the franchisees within the group are in the A or B category in that regard.  The issue is neither unreal or hypothetical in the circumstances.

83                  Moreover, to the extent that the respondent suggests that the issues between the respondent and the group B franchisees can be determined in the fullness of time, I do not agree with that reasoning.  The reality is that, from time to time, various persons or groups of persons within the group B category of franchisees will find themselves having to decide whether or not to renew their franchise agreements under cl 3 of the Old Agreement.  If they were each required, as the time for election arrives, to freshly litigate the question, it would, in my view, having regard to the history of this matter, quite possibly place those franchisees at a disadvantage in their dealings with the respondent.  They would, at the very least, be under time constraints, not to mention financial constraints to litigate the issue.  If it were then said they could take "guidance" from the Court's earlier consideration of the issues that had arisen out of this proceeding at the instance of the group A franchisees, they would reasonably say – "But we were not permitted to be parties to that proceeding."

84                  To the extent that the respondent says that because the current franchise agreement of the respondent may continue to evolve there is no real issue to try and there will be something in the nature of a factual "moving feast", I do not accept that submission.  As stated above, all franchisees, whether in group A or group B have an interest in the clarification of their current rights to renew their franchise agreement (whether immediately having exercised the option to renew, or later when the time for exercising that option arrives).

85                  It seems to me that the very purposes and objects of the representative proceeding provisions of the Federal Court Act were designed for a case such as this.  A representative proceeding that includes both group A and group B franchisees enables a relatively inexpensive and efficient means of clarifying the contractual rights of the franchisees in both categories.

86                  The respondent has focussed in particular on the relief sought in claim 3.12 of the proposed amended application as a way of demonstrating the premature or hypothetical nature of the proceeding in relation to group B members.  In my view, the submissions of the respondent in that regard are based on a misconception as to what claim 3.12 is.  Claim 3.12, which is merely an alternative form of relief in the event that the earlier constructional issues do not find favour with the Court, seeks to raise an alternative construction of the renewal right in the Old Agreement.  While the relief sought in claim 3.12 might be contended to be not open, it is not a claim that actually depends upon developing factual scenarios.  Rather, it claims in effect a formula for agreeing the terms of a renewed franchise agreement, which terms have regard to the factual circumstances as they may exist at particular times when a franchisee seeks to exercise the option to renew the franchise agreement.  It is, when properly perused, merely another constructional argument – the last of them – put forward on behalf of the franchisees.

87                  There is also a question whether there are facts that are sufficiently common to raise a substantial common issue of law and fact in relation to the relief sought on behalf of all franchisees in respect of the alleged unconscionable conduct of the respondent.  For present purposes I consider that there is.  The application on behalf of all franchisees relies upon the conduct of the respondent following the decision of the Federal Court in Hoy Mobile and seeks to attribute significance to the conduct of the respondent pleaded in the proposed amended statement of claim in respect of individual franchisees as relevant to all franchisees.  Whether or not the cause of action is established and the franchisees are entitled to relief is another thing.  However, I consider that there is a substantial common issue of law and fact in relation to the unconscionable conduct claims.  In any event, to the extent it may be argued that there is doubt that the unconscionable conduct claims of the various members of the group of franchisees does not raise a substantial common issue of law and fact that does not disentitle the applicant to commence this representative proceeding in light of the constructional claims made on behalf of all members of the group that I consider to raise a substantial common issue of law.

88                  I would not, in these circumstances, consider it appropriate to exercise the discretion under s 33N to discontinue the representative proceeding that has been commenced, upon leave being given to the amendment of the application and statement of claim.

89                  While numerous authorities were cited by counsel for the respondent concerning the importance of the Court having before it a justiciable issue, claims that are not "hypothetical" and a "matter" that can be dealt with by a Ch III court, it seems to me that one way or another the issue comes back to the question whether or not the representative proceeding on behalf of all franchisees, both group A and group B members, raises real issues with real consequences depending on the outcome.

90                  In Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in a joint judgment at [59] were critical of the Full Court of the Federal Court endeavouring to answer questions without a proper factual basis having been established in relation to the questions.  In the course of explaining that conclusion, the plurality emphasised a number of well established propositions:

•          Central to the purpose of a judicial determination is the notion that such a determination includes a conclusion or final decision based on a concrete and established or agreed situation to change or quell a controversy: [45].

•          A judgment of a court is an affirmation, by the approved societal agent of the state of the legal consequences attending a proved or admitted state of facts.  It is a conclusive adjudication that a legal relationship does or does not exist.  The power to render judgments, the so called "judicial power" is the power to adjudicate upon contested or adverse legal rights or claims, to interpret the law, and to declare what the law is or has been: [46].

•          Because the object of the judicial process is the determination of the rights of the parties to an action, the Courts have traditionally refused to provide answers to hypothetical questions or to give advisory opinions.  The jurisdiction with respect to declaratory relief has developed with an awareness of that traditional attitude: [47].

•          A declaration will not be granted where the question under consideration is not a real question, by "not a real question" hypothetical or academic questions are identified.  However the jurisdiction to grant declaratory relief includes the power to declare the conduct which has not yet taken place will not be in breach of a contract or a law and such a declaration will not be hypothetical in the relevant sense: [47].

•          One crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties: [48].

91                  In Bass at [49] the plurality was critical of the answers given by the Full Court and the declaration it made as they were:

not based on facts, found or agreed, they were purely hypothetical.  At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established.  What those facts are is not stated, nor can they be identified with any precision.  They may be all or some only of the facts.  What facts are determinative of the legal issue involved in the question asked is left open.  Such a result cannot assist the efficient administration of justice.  It does not finally resolve the dispute or quell the controversy.  Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings.

92                  In Bass at [47] the Court referred approvingly to what Barwick CJ had said in Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 at 305 concerning the jurisdiction of the Court to declare conduct which has not yet taken place to be in breach of a contract or a law and that a declaration in such circumstances will not be hypothetical. 

93                  In Sterling the respondent company carried on the business of a duty free shop with a concurrence of the Department of Customs and Excise. In the course of the respondent dealing with customers and the delivery of duty free goods to an aircraft, two legal obstacles were said to have stood in the way of the completion of such delivery of goods to a departing passenger purchaser in the airport.  First it was said that the delivery of the goods was in breach of the Airports (Business Concessions) Act 1959 (Cth), second it was said that only a delivery of such goods to a passenger purchaser in a holding room could lawfully be made in conformity with the control of Customs.  The respondent brought proceedings for declarations that its delivery of goods within the airport to passenger purchasers was lawful.  Barwick CJ at [305] said:

The jurisdiction to make a declaratory order without consequential relief is a large and most useful jurisdiction. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law. Indeed, it is that capacity which contributes enormously to the utility of the jurisdiction.

94                  While these observations were apparently not endorsed by the other members of the Court, as noted, in Bass they were referred to with approval, although Bass itself was not considered such a case.

95                  In IMF (Australia) Ltd v Sons of Gwalia Ltd (administrator appointed) (2005) 143 FCR 274, Emmett J at [67] – 68] (with whom Moore J agreed at [16]), considered that in the circumstances of the case before the Court it may not have been open to grant declaratory relief because the relief sought would not relate to a "matter" within the meaning of s 75, s 76 and s 77 of the Constitution.  In the primary proceedings, the appellant had sought a declaration in the Federal Court that its proposed use of certain information fell within an exception contained in s 177(1A)(a) of the Corporations Act 2001 (Cth).  The primary judge (French J) had been prepared to grant such declaration because he considered the proceeding nor hypothetical nor contingent and contained a real question, namely whether IMF could lawfully proceed in using the information obtained from the register.  In the event, by reason of the conclusion by the majority in relation to another issue, it was not necessary to deal with the issue.  However, Emmett J at [68] said:

The fact that declaratory relief relates to the lawfulness of future conduct does not necessarily mean that such relief is beyond the power of the Court.  On the other hand, a declaration in relation to a hypothetical situation or set of circumstances, which may never arise, borders on an advisory opinion and would therefore be outside the jurisdiction of the Court.

96                  By focussing on the question whether or not there is a "matter" for constitutional purposes may be helpful but perhaps not always the most desirable way to determine whether the Court should exercise its power to entertain an application before a declaration in a particular case.  So far as the word "matter" is concerned, Kirby J in Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 at [156] observed:

It is undesirable that the word [matter] should be subjected to excessive refinement or submitted to inappropriate elaboration leading to unnecessary constitution rigidity.

97                  In Australian Gas Light Company v Australian Competition Consumer Commission (No 2) [2003] FCA 1229 the applicant, in effect sought declarations that its proposed acquisition of an interest in an entity that would acquire the business and asset Loy Yang Power Station and associated transactions would not have or would not be likely to have the effect of substantially lessening competition in a market in breach of s 50 of the TPA.  Amongst other points, the ACCC contended that the Court had no jurisdiction to grant the declarations sought as there was no "matter" in relation to the s 50 issue.

98                  French J reviewed a number of authorities concerning the circumstances in which the Court has jurisdiction to grant declaratory relief and rejected the contention of the ACCC.  At [40] French J stated:

The making of a declaration as to the lawfulness of future conduct has long been accepted as an exercise of judicial power. The fact that declaratory relief relates to future conduct does not place it outside the bounds of federal jurisdiction. If the claim for the declaration arises out of a contemporary controversy in which a party's freedom of action is challenged in some way, that controversy can constitute a matter for the purposes of the exercise of federal jurisdiction. Whether or not there is a real controversy is a question of judgment. In the present case, in my opinion, there is a real controversy about the right or freedom of AGL to proceed with the proposed acquisition in relation to the Loy Yang A power station and the coal mine. Its freedom to do so has been challenged in a very practical way by the regulator in correspondence and most explicitly in its defence where it denies that the proposed acquisitions would not contravene s 50 of the Trade Practices Act. Reservations about or opposition to a proposed acquisition expressed by the regulator can have very concrete commercial consequences and may in some, if not most, cases effectively prevent an acquisition from proceeding.

99                  French J at [46] concluded that the Court was therefore apprised of "a real controversy with real consequences depending upon its resolution", thus the Court was not deprived of jurisdiction for want of a "matter" in that case.

100               The respondent submitted that a number of cases on the factual circumstances suggested that there was no real controversy or jurisdiction to grant declaratory relief, no "matter", thus no "claim" for the purposes of s 33(C) of the Federal Court Act to sustain a representative proceeding in respect of the class of the franchisees.  In this regard the respondent likened the position of the group B franchisees, who are yet to have the opportunity to decide whether or not to exercise the option to renew their franchise agreements, to that of the unsuccessful applicants considered in a number of authorities.

101               For example, the respondent cited Draper v British Optical Association [1938] 1 All ER 115 where the plaintiffs unsuccessfully sought a declaration that the defendants had no right to compel him to behave in a particular way, when all they had done is to call a meeting to consider his conduct.

102               In Re Clay, Clay v Booth [1919] 1 Ch 66 the plaintiff also unsuccessfully sought a declaration that he was not liable under a particular deed not withstanding that no claim had been made under the Deed.

103               In Melstrom v Garner [1970] 2 All ER 9 a retired partner unsuccessfully sought a declaration as to the construction of the covenant against canvassing customers but did not possess the intention to pursue such activity.

104               These cases, it might be said, all rather speak for themselves.  Either circumstances simply had not arisen that gave rise to any real issue or, in a related way, there were grounds for the Court to exercise its discretion not to entertain such peripheral issues.

105               The respondent also emphasised the decision in Dormer v Solo Investments Pty Ltd (1974) 1 NSWLR 428.  The defendant vendor had sold certain land to a purchaser plaintiff knowing there was a real possibility that a gas pipeline might be built through part of the subject land and, that if this occurred, an easement restricting the use of the land might be granted.  The defendant vendor did not inform the purchaser plaintiff of this prior to entering into the contract.  After the plaintiff became aware that the proposed gas pipeline would pass through the subject land, he sought a declaration that he was entitled to rescind the contract on the basis of nondisclosure.  Holland J observed at 434:

I should observe that, if I had been in the plaintiff's favour, I would have had doubts whether the jurisdiction of the court to make a declaration of relief ought to have been exercised in the present case.  I am not the least inclined to find limits on the beneficial jurisdiction of this Court to make declarations of right, but it is one thing to declare present contractual rights of the parties, another to declare them contingently on the plaintiff electing to take some course that he has not yet taken is not bound to take and may not take.  In the present case the plaintiff has said that, If I were to find that he was entitled to rescind, that he would rescind, but he would not in any way have been bound to do so if I had made the declaration that is sought.

It seems to me that, although the claim in the summons is for an order that the plaintiff is entitled to rescind, in substance, the relief that is sought is a declaration that, if the plaintiff elects to give a notice of rescission, that notice of rescission will be effective to terminate the contract.

I think the court ought to hesitate to make declarations as to the potential effect on the contractual position of the parties of events upon which a party has not yet acted and which would not alter the existing contractual rights unless he did so act.

106               Again it can be seen that the circumstances in which these comments were made by Holland J are not the circumstances currently before the Court. What the plaintiff wanted in Dormer was a declaration that, if he wanted to do so, he could act in a particular way.  That suggests there is not a real issue with real consequences before the Court.  At least, as a matter of judgment that is what the Court there decided, in my view.

107               The respondent here suggests that a real issue with real consequences is not presented because the group B franchisees have not yet been called upon to decide if they will in fact choose to exercise their franchise agreements.  In my view, such a future consideration, while relevant, is not determinative in the present circumstances.  What the group B franchisees would want to know, in my view, and are entitled to know, is what their present contractual entitlements are so that they are properly informed, in good time, to decide whether or not they should exercise their option to renew their franchise agreements.  They have made no doubt, substantial investments in their businesses.  The uncertainty that the group A franchisees are currently experiencing in their dealings with the respondent only serves to highlight the real value of the controversy and the real likelihood of consequences depending on the determination of the issues raised.

108               The respondent also makes reference to Pacific Brands Household Products Pty Ltd v Singan Investments Pty Ltd [2003] VSC 76.  In this case, the plaintiff had taken assignment of the rights and obligations of the lessee under two leases pertaining to two lots of lands. The defendant was the lessor under those two leases.  Both leases granted the lessee the option to purchase, at the "market value of the freehold", the land upon giving notice in writing at any time during the term of the lease.  The plaintiff sought a declaration as to the meaning of the option to purchase clause.  Habersberger J considered at [16] that the Court was being asked inappropriately to provide an advisory opinion.  His Honour was of the view at [16] that:

Unless and until the plaintiff exercises the options to purchase there is no dispute in respect of which the Court can be asked to adjudicate.

109               In my view, whether or not in a given case, such as that thrown up by Pacific Brands, a court will consider that a declaration is improperly being called for, is a matter of judgment.  One can understand, in such a case, that there was considered to be no relevant issue, certainly no real consequences flowing from a real issue, in relation to the meaning of the expression "market value of the freehold" until such time as the option to purchase is exercised.

110               However, in my view, the situation in which the group B franchisees find themselves in this case is quite different.  I consider they are entitled to have the benefit of the construction of the existing Old Agreement in commercial circumstances where they know that the respondent has challenged the entitlement of group A franchisees to have their Old Agreements renewed in the same or similar terms. 

111               In summary then, I am satisfied that the proposed representative proceeding on behalf of all the relevant franchisees, both within the so called group A and the so called group B, have "claims" within the meaning of s 33C(1)(a) of the Federal Court Act; that the declaratory relief sought in respect of those claims gives rise to real issues with real consequences depending on the outcome, so that the Court is not being asked to entertain a hypothetical proceeding; and that there is a relevant "matter" before a Ch III court.

112               I am satisfied that the other preconditions to a representative proceeding specified by s 33C(1)(b) and (c) are met in respect of the group B members.  The claims arise out of the same or related circumstances and give rise to a substantial common issue of law and fact.

113               I also consider that the maintenance of a representative proceeding would serve the administration of justice, and the objects of s 33C by enabling a cheaper and more efficient means of resolving matters in dispute between all franchisees and the respondent.

114               I do not consider that this is a case where the Court should exercise its discretion under s 33N to discontinue the representative proceeding (at least on the basis of the material and issues currently before the Court).

TRADE PRACTICES RELIEF

115               As noted, the proposed amended claim seeks relief under s 87(2)(b) of the TPA for all franchisees (claim 3.4A).

116               In respect of this claimed relief the respondent says that it is premised on an allegation of unconscionable conduct to the effect that the respondent is:

Threatening to require group members to execute draft franchise agreements in a form or upon terms corresponding to those [provided to the applicant] and has [thereby] engaged in unconscionable conduct contrary to s 51AC of the Act.

The respondent contends that such a claim is untenable for the following reasons:

•          Even if the Court could be satisfied that the alleged conduct could amount to unconscionable conduct the jurisdiction to make an order under s 87(2)(b) requires a finding that the group members "have suffered or are likely to suffer loss or damage" by the conduct complained of.  The respondent says that in relation to those franchisees who are yet to exercise a right of renewal, the group B franchisees, no allegation of loss or damage is yet made.  All that can be said is that loss or damage might be suffered if the right of renewal is exercised and the alleged threat is carried into effect.

•          The amended application in terms relates to the franchise agreement provided to the applicant, yet that document has already been superseded and in all probability will be further superseded by the time the notices of renewal are exercised.

•          The alleged "threat" to require group members to execute "draft franchise agreements" is inconsistent with the conduct complained of which rises no higher than the requirement for franchisees to execute the then current franchise agreement in order to exercise a right of renewal.

117               The respondent emphasises that the powers conferred by s 87 are only enlivened under subs (1) where the Court finds that a person who is a party to the proceeding or under subs 1(A) upon the application of a person "who has suffered or is likely to suffer, loss or damage by the conduct of another person" contravene Pt IVA of the TPA.  Thus, there must be a casual connection between the contravening conduct and the loss or damage suffered, or likely to be suffered: see Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at [38].

118               The respondent says that, even accepting the hypothesis that the respondent has required group members to execute the new franchise agreement as a condition of the right of renewal, it cannot be said that such a "threat" is likely to cause loss or damage until such time as the right of renewal is exercised and the "threat" is then carried into effect.

119               The respondent contends that even if it could be construed that it has threatened that, in say 2012 it will require a franchisee to execute the then current franchise agreement, how can such a franchisee presently establish that he, she or it is "likely to suffer" loss or damage.  The respondent submits the difficulties raised by this question are even more manifest where the terms of the "then current" franchise agreement are not currently known.

120               The respondent emphasises that in the amendments to the statement of claim currently proposed there is no allegation that any of the group members have presently sustained any loss or damage.  Rather the pleading proceeds on the premise that the parties will only sustain loss or damage in the event they are compelled to execute a new franchise agreement.

121               The applicant by contrast emphasises that the threat is in the conduct designed to have all franchisees sign the New Agreement.  In other words, to oblige the franchisees to forgo their existing contractual entitlements.  In this regard, the applicants say that it is unnecessary for the applicants to have to plead any loss or damage sustained or likely to occur as at the date at the exercise of the option to renew a current contract.  The applicant says the current conduct of the respondent is unconscionable.  It seeks an order on behalf of all franchisees modifying the renewal clause in the event that it is not construed in accordance with the earlier claims of the applicant.  It also seeks an order under s 80 that the respondent be restrained from continuing with the behaviour complained about.  The applicant says the relief relates to the contracts that now exist.

122               The applicant says that so far as the respondent objects to the relief sought under s 87 of the TPA, the respondent's objection asserts the fallacy that the unconscionable conduct that has occurred and is continuing cannot be the subject of relief merely because the conduct is directed at a future goal.  This fails to give meaning to the words "or is likely to" in s 87(1), a fallacy that was exploded by Wilcox J in Tobacco Control Coalition v Philip Morris (Australia) Ltd [2000] FCA 1004 at [109].

123               The applicant also contends that the power of the Court to grant an injunction under s 80(1) of the TPA are wide enough to contemplate the unconscionable conduct of the respondent pleaded by the applicant.

124               At this point of a proceeding, I do not consider the claims to relief under s 80 and s 87 of the TPA should be struck out.  The applicant on behalf of both group A and group B franchisees identifies present conduct as a basis for the claimed relief.  The fact that group B applicants have not yet been obliged contractually to exercise their options to renew the franchise agreement in the circumstances is irrelevant.  The claims made on behalf of the group B franchisees in any event is that, if they are forced, in effect, to sign a New Agreement in due course, then they are persons who are "likely to suffer" loss or damage for the purposes of s 87.  For present purposes, I am satisfied that there are sufficiently pleaded claims for the claims to remain.

125               Section 80(1) of the TPA expressly provides that:

(1)               Subject to subsections (1A), (1AAA) and (1B), where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

                     (a)  a contravention of any of the following provisions:

                              (i)  a provision of Part IV, IVA, IVB, V or VC;

                             (ii)  section 75AU or 75AYA;

                     (b)  attempting to contravene such a provision;

                     (c)  aiding, abetting, counselling or procuring a person to contravene such a provision;

                     (d)  inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision;

                     (e)  being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

                      (f)  conspiring with others to contravene such a provision;

the Court may grant an injunction in such terms as the Court determines to be appropriate.

126               Here, the applicant on behalf of all franchisees pleads that the respondent has engaged in conduct that involves contravention of the relevant provisions, or "is proposing to engage" in conduct that would constitute a contravention of a relevant provision.

127               Whether or not the conduct pleaded will, after a trial, be considered to be as pleaded, is another issue.  I am not prepared at this stage to rule that the conduct pleaded cannot meet that standard, notwithstanding the current submission of the respondent that the "threat" alleged cannot satisfy that description.  In my view, the proposed claim and pleading of the applicant on behalf of all franchisees is such that the conduct goes beyond the "threat" arising out of the letter sent following "mediation", but includes also the wider conduct pleaded concerning a range of individual franchisees that impacts on the dealings with all franchisees.

128               That the Court has wide powers to deal with proposed conduct that contravenes the TPA in relevant respects is undoubted: see ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 267; BMW Australia Ltd v Australian Competition and Consumer Commission (2004) 207 ALR 452 at [36]; Foster v Australian Competition and Consumer Commission (2006) 149 FCR 135 at [35].

SPECIFIC OBJECTIONS TO THE PROPOSED AMENDED APPLICATION

129               The respondent makes a number of specific objections to the proposed amended application and statement of claim.  These have been enumerated in a schedule to written submissions by the respondent and responded to by the applicant in a similar form.  The parties rely on their written submissions in this regard, in the event that the Court allows a representative proceeding to go forward together with the claims for relief under s 80 and s 87 of the TPA.

130               The first specific objection to the proposed amended application is in respect of claim 3.1 that seeks specific performance of the Old Agreement.  The respondent says the applicant impermissibly seeks specific performance of an executed agreement, by comparison to any executory components.  Further, that the qualification that it be executed on the terms of the Old Agreement "as declared", is meaningless.

131               The applicant says that the objection must be read as to the whole of the claim 3.1 and that, if valid, it would be an objection to claim 1 of the existing application.  The applicant says that it cannot be a valid objection to the amendment.  The applicant says its complaint is that cl 3 has not been yet performed and that the respondent is refusing to perform it. 

132               The applicant says, as to the words "as declared", the relevant full phrase in the claim is "as declared … herein by this honourable Court".  The applicant says there are various declarations sought elsewhere in the claim.

133               In my view, the objections taken to claim 3.1 should not lead to strike out.  It is sufficiently clear that the applicant requires relief that the respondent provide renewal of the Old Agreement or a new agreement in terms as declared or varied by the Court, having regard to later claimed relief.  Accordingly, the objection to claim 3.1 is disallowed.

134               The respondent objects to claim 3.1A, which seeks a declaration as to the meaning of the Old Agreement in circumstances where, it says, there is no justiciable controversy in respect of the group B franchisees.  This general objection has been dealt with above.  For the reasons given above, this particular objection is disallowed.

135               The respondent further objects to claim 3.1 on the basis that the Old Agreement be executed "as declared" is meaningless.  This is the same as or similar to the objection taken in respect to claim 3.1 and dealt with above.  For the same reasons this objection is disallowed.

136               A third objection is taken to claim 3.1 in respect to the reference to specific performance:

(a)        to the extent that the reference is to a declaration that the agreement "ought to be specifically performed" it is said to be in an inappropriate form for declaratory relief; and

(b)        to the extent that it seeks an order for specific performance, such an order is hypothetical as it relates to group members who have not yet served notice of intention to renew.

137               So far as (b) is concerned, this question has been dealt with above and for the reasons given earlier the objection is disallowed.

138               As to (a), while there is little doubt that a court would be unlikely to grant a declaration of precisely those terms, the shaping of any relevant remedy which may be available is a matter that can be dealt with at trial, it is not a strike out point.  The objection is disallowed.

139               In relation to claim 3.2, which seeks a declaration of rights "in the events which have happened" the respondent says this is a vague and embarrassing plea and inconsistent with the claim for declaratory relief.  In my view, the "events which have happened" are sufficiently particularised in the claims made and in the proposed statement of claim.  The circumstances in which the applicant seeks declarations are sufficiently clear not to be considered vague or embarrassing, nor inconsistent with a claim for declaratory relief.  The objection is disallowed.

140               Claim 3.2 is also objected to on the basis that the declaration sought in claim 3.2.3 in the alternative, is impermissible having regard to the incorporation of claim 3.12 and the objections to claim 3.12 raised by the respondent.  In my view, for the reasons given earlier in relation to the proper understanding of claim 3.12, it is an alternative claim to the declarations as to the meanings of the Old Agreement currently, not at some in the future.  The objection is disallowed.

141               The respondent also objects to claim 3.2A.1 on the basis it is hypothetical as it relates to group members who have not yet served their notice of intention to renew.  For the reasons given earlier in relation to the general issue and the availability of the declaration in relation to group B franchisees the objection is disallowed.

142               The respondent also objects to the declaration sought in claim 3.2A.3 as being impermissible having regard to the incorporation of claim 3.12.  For reasons given above in relation to this issue concerning claim 3.12, the objection is disallowed.

143               The respondent further objects to claim 3.3A because it is apparently premised on the allegation at claim 19 of the proposed amended statement of claim.  The respondent says claim 19 of the amended statement of claim misstates the effect of the communication pursuant to which the plea is based.  On its terms, the communication states "the renewal is to be on the terms of Allphones then current Franchise Agreement (that is, the New Franchise Agreement)" the term "New Franchise Agreement" is defined to mean "the revised form of franchise agreement Allphones adopted in September 2007 and any variations to that agreement".

144               The applicant in response to this point says that this is a matter for trial.  The respondent on a demurrer point must take the pleading as it stands.  In any event, claim 3.3A does not by its terms refer to the statement of claim. 

145               This is a matter that can also stand until trial.  I would not strike out that claim at this point.  The objection is disallowed.

146               The respondent also objects to claim 3.3A on the basis that the declaration sought is hypothetical.  For reasons given above, the objection is disallowed.

147               The respondent finally objects to claim 3.3A on the basis the terms of the instrument do not support any position on the part of the respondent, nor, any threat to impose a requirement to execute any agreement, and the allegation is inconsistent with the document incorporated into the pleading.

148               The applicant submits that this objection is an attempt to elevate a construction issue into a demurrer point.  The respondent does not provide an alternative construction. 

149               At this point I do not consider that the objection should be upheld.  It is a matter for trial.  The objection is disallowed.

150               The respondent further objects to claim 3.4A in which the applicant on behalf of all franchisees seeks an order pursuant to s 87(2)(b) of the TPA varying in effect cl 3 of the  Old Agreement.  The respondent says that questions of unconscionability cannot be assessed in advance of any dealing, it is not possible to say whether a group member will likely sustain any loss until the conduct is engaged in and further when the form of the current agreement is known.

151               For the reasons given above in relation to the TPA issues arising under s 80 and s 87, the objection is disallowed.

152               The respondent also objects to claims 3.9, 3.10 and 3.11 on the basis that none discloses a justiciable issue between the respondent and group B franchisees and the question is hypothetical.  For the reasons given above in relation to these issues, the objection is disallowed.

153               The respondent objects to claim 3.12, which is an alternative claim for a declaration concerning the construction of the renewal clause of the Old Agreement. This has been referred to above. For the reasons given above, I do not consider that the issue is hypothetical.  Whether or not it is an appropriate form for a declaration of rights, is a matter for trial.  I overrule the objection.

154               The respondent objects to claim 3.13 which seeks injunctions under s 80 of the TPA on the basis there is no pleaded basis for the contention that the respondent has required or sought to require the applicant or any group members to execute any agreement (rather than an indication on which a renewal could be effected).  And that there is no pleaded basis for any contention that the respondent will require group members to execute an agreement in the form submitted to the applicant.

155               At this point, I consider, as submitted by the applicant, that the claims made and the proposed amended statement of claim allege that the respondent has required the applicant to execute the "New Agreement" and has threatened to take the same approach to other franchisees.  This is an issue that should go to trial.  The objection is disallowed.

156               The respondent objects to claim 3.14 which also seeks injunctions under s 80 of the TPA restraining the respondent from dealing with all franchisees on any footing other than that they are entitled to renew the Old Agreement.  The respondent says that 3.14 is not framed in an appropriate form for injunctive relief and there is no basis for the relief which could only come into effect in the future and upon a future occurrence. 

157               This too is a matter for trial.  The objection is disallowed.

158               The specific objections also include objections to the questions of law or fact common to the claims of the group members framed by the applicant.  These are all dealt with above and for the reasons given earlier I consider each to be arguably relevant.  The objection is disallowed, to the extent that it is necessary to do so.

OBJECTIONS TO THE PROPOSED AMENDED STATEMENT OF CLAIM

159               The respondent objects to claim 9F of the proposed amended statement of claim which pleads:

Had Allphones complied with those obligations it is likely that the Applicant and group members would have sought and obtained professional advice concerning their agreements before entering into them.

160               The respondent says these allegations are irrelevant in the absence of an allegation that the applicant and group members did not in fact seek and obtain professional advice.  The applicant says that s 51AC(3)(g) of the TPA provides that the Court may have regard to the requirements of an applicable industry code, which is pleaded by claim 9C and claim 9F of the proposed amended statement of claim, which alleges systematic contravention of the Code.  I am prepared at this stage to allow the pleading to stand.  The objection is disallowed.

161               The respondent objects to claim 9H which pleads that:

Each of the Applicant and the group members upon the faith of the grant of the franchise, including the right of renewal, entered into his, her or its franchise agreement and has invested substantial time, effort and money into the business and assets required pursuant thereto.

The respondent says these allegations are irrelevant in the absence of an allegation that group members would not have so acted in the manner pleaded in the absence of specified conduct of the respondent, which conduct must be identified.

162               The applicant says claim 9H is said not to say what it plainly does say.  That is that "upon the faith of the grant of the franchise" it did these things. 

163               Again, I am prepared to allow the issue to go to trial.  The objection is disallowed.

164               The respondent objects to claim 9I.  There is no such paragraph.  The objection is disallowed.

165               The respondent objects to claim 9J, which pleads that:

The actions referred to in paragraph 9H were substantially commenced before Allphones proposed to introduce new agreements substantially less favourable than the terms of the Old Agreement and without prior notice of that intention.

The respondent says the allegations are irrelevant in the absence of an allegation that the group members would not have so acted in the manner pleaded therein in the absence of the specified conduct of the respondent, which conduct must be identified.

166               The respondent for similar reasons, also objects to claim 9K, which pleads that:

The investment of substantial time, effort and money referred to in paragraph 9H was continued after Allphones proposed to introduce new agreements substantially less favourable than the terms of the Old Agreement, but in circumstances where the Applicant and group members were already legally committed to their franchise agreements and financially committed to their franchised businesses.

167               The applicant says the pleas made are perfectly reasonable.  I consider there is sufficient pleaded here for the respondent to make the case being purported. 

168               The issues may proceed to trial.  The objections are disallowed.

169               The respondent objects to para 12D which pleads that:

As a result of the issues being raised in the Hoy Mobile proceedings, Allphones decided that it could seek to deprive its franchisees of the rights and entitlements that were, in the event, found by the Court in that matter.

The respondent says the allegations are hopelessly vague and embarrassing or in the alternative lacking appropriate particularity, in that the allegation that the "issues being raised in the Hoy Mobile proceedings" is hopelessly vague in the absence of the identification of the issues referred to, and the manner in which they were raised.

170               The applicant contends that the meaning of the words "issues… raised" as a matter of language relate to the "rights and entitlements … found" and are quite clear.  The judgment pleaded can be made and the respondent was a party to those proceedings. 

171               I accept that to some extent interpretation of this plea is required.  It seems to me that the rights and entitlements franchisees were apparently entitled to under the Old Agreement following the Hoy Mobile decision of this Court, are sufficiently clear for all parties to know what is in issue here.  I am therefore not prepared to strike out that plea on the basis that it is vague and embarrassing.  The objection is disallowed.

172               The respondent objects to claim 12E which pleads that:

To give effect to that intention, Allphones devised a plan to migrate its existing franchisees from agreements in the form of the Old Agreement to a new form of agreement and to obtain in its favour releases by franchisees of Allphones' liabilities for the matters subject of the said findings in the Hoy Mobile proceedings.

The respondent says the allegations are also hopelessly vague and embarrassing, or in the alternative lacking appropriate particularity and that the "plan" allegedly "devised" by the respondent is not identified.

173               The applicant says that claim 12E expressly states the plan to "migrate its existing franchisees … to a new form of agreement" etc. 

174               I consider the plea made is sufficiently particular for the respondent to know the allegation made against it.  The objection is disallowed.

175               The respondent objects to claim 12F, which alleges that Allphones "has applied undue pressure to franchisees to induce them to accept new terms and give the releases" referred to in claim 12E, in a number of ways particularised in claims 12F.1 – 12F.10.  The respondent says the allegations are vague and embarrassing or in the alternative lacking appropriate particularity, in that, in the context of each alleged threat that particular conduct is not identified and the party to whom the threat was allegedly made is not identified.

176               I consider there is sufficient particularity in the plea made in claim 12F for the respondent to know what is alleged against it and for the trial to proceed on this issue.  The conduct that is said to constitute the "undue pressure" is specifically alleged to have been applied to "franchisees".  In that sense, it is a global complaint.  To the extent it is not sufficiently particularised it is open to the respondent to seek further particulars.  The objection is disallowed.

177               The respondent objects to claim 13A which pleads that;

The Allphones Dispute Notice was given pursuant to the intention and plan referred to in plan 12D and 12E hereof. 

The respondent says that the allegations are hopelessly vague and embarrassing or in the alternative lacking appropriate particularity in that it is unclear what can be intended by an allegation that a "notice was given pursuant to the intention and plan".  This is exacerbated by the improper pleading in claim 12D and claim 12E. 

178               I have already disallowed the objections to claim 12D and claim 12E and also disallow this objection.  It is plain enough what the applicant is alleging, there is nothing in that sense vague or embarrassing about it.  Whether or not the allegations are made out factually at trial is another thing.

179               The respondent objects to claim 17A which pleads that:

Each of the terms pleaded in paragraph 16;

17A.1   alters the rights of the parties under the group members' franchise agreements;

17A.2   is detrimental to the interests of the group member; and

17A.3   benefits Allphones to an unreasonable degree, in that Allphones' obligations to the group member under the New Agreement are less alternatively no more onerous than those owed by Allphones under the group member's agreement.

The respondent says the allegations, particularly in the context of allegations of claims 14 ‑ 16, are meaningless.  How can the term of the draft agreement, which has not subsequently been executed, affect or alter any rights? 

180               The applicant says this pleading is a perfectly clear statement expressing the effect of the proposed "New Agreement".

181               I agree with the response of the applicant.  What is in issue is clear enough.  It is a matter for trial.  The objection is disallowed.

182               The respondent objects to claim 18 which pleads that:

On 12 September 2008 Allphones, informed the applicant and franchisees generally, in effect, that Allphones would not negotiate with those franchisees who appointed solicitors Birch Partners to represent them in the negotiations proposed in the Allphones Dispute Notice.  [Particulars are given.]

The respondent says the allegation that the respondent "informed … franchisees generally" is inconsistent and embarrassing in circumstances where the particulars disclosed that it was only a small sub‑set of franchisees who were present at that meeting. 

183               The applicant responds by saying that the pleaded characterisation of the publication is fairly available and will depend on the evaluation of evidence at trial.

184               I agree with the applicant's submission.  It is too early to consider a strike out of this particular pleading on that ground.  The matter should go to trial.  The objection is disallowed.

185               The respondent objects to claim 19 which pleads that:

On or about 28 September 2008, Allphones informed the applicant and the group members, in effect, that if the applicant or group member declined to execute the New Agreement following the negotiations and/or the mediation proposed in the Allphones Dispute Notice, Allphones would nonetheless require that the applicant or group member execute an agreement in terms of the New Agreement in the event that the applicant or group member exercised the right to renew the Old Agreement.  [Particulars are provided.]

The respondent says the allegation is inconsistent with the terms of the document which is said to constitute the particulars of the allegation (and which is thereby incorporated into the pleading).  It is clear from the terms of the document that the reference is to the "then current agreement", being the revised form of the franchise agreement as varied.  The "New Agreement" as defined in the amended statement of claim (at claim 15), by way of contrast, refers to an existing agreement in the form provided to the applicant.

186               The applicant denies that claim 19 is inconsistent with claim 15 and says it is not.  The applicant says the objection in any event is not an objection to the amendments but an objection to an existing power of the pleadings.

187               I am prepared to allow this issue to go to trial.  Whether or not there is any relevant inconsistency so that the terms of the document referred to in claim 19 are inconsistent with that pleaded in claim 15 can be resolved at trial.  The objection is disallowed.

188               Finally, the respondent objects to claim 33A which pleads that:

Allphones engaged in the conduct pleaded in paragraphs 25 to 32 in order to coerce the group members to sign an agreement in terms of the New Agreement, irrespective of whether Allphones have an enforceable right to require any of them to do so in order to effect the renewal of the relevant agreement.

The respondent says the allegation is hopelessly vague and embarrassing in that the conduct alleged at claims 25 to 32 bears no relation to the allegation in claim 33A.

189               The applicant says the objection is argumentative.

190               I tend to agree with the submission of the applicant.  Whether or not the conduct pleaded in claims 25 to 32 ultimately supports the pleading in claim 33A is a matter for trial.  It is sufficiently clear what is alleged.  I am not prepared to find at this stage that the conduct pleaded "bears no relation" to the allegation made.  The objection is disallowed.

costs

191               In light of the above rulings, the notice of motion to amend the application and the statement of claim and the conversion of the proceedings into a representative action will be allowed.  The objections to the claims made and the new pleading will be dismissed.  In those circumstances the applicant should be entitled to its costs on the notice of motion.

192               Notwithstanding the submissions by the applicant to the contrary I do not consider the objections were so lacking in merit that a special costs order is warranted in this case.

193               I do not consider that the amendment applications were unreasonably opposed in this case. 

194               I therefore reject the application of the applicant that the respondent should pay the applicant's costs of the notice of motion on an indemnity basis.

195               As to the respondent's submission that the amendments were sought by reason of the earlier strike out application taken but now abandoned by the respondent in light of the proposed amended application and statement of claim, I am content to note that the amendments have been driven in very large part by the applicant's desire to convert the proceedings to a representative proceeding.

196               The applicant also points out that other issues were initially raised on the strike out application by the respondent, including a privilege point and a causation point.  The privilege point has ceased to be relevant.

197               As to the causation point, the respondent contends that the introduction of claim 6A of the statement of claim (which is not the subject of an objection), which pleads that it was an implied term of issue of the Old Agreement and the group members' franchise agreements that Allphones exercise its contractual powers in good faith and reasonably and not capriciously and only for purposes for which they are conferred, now renders relevant to an issue of bad faith or the later parts previously objected to causally irrelevant.

198               In all, I consider the objections dealt with above stand alone.  As I have noted the applicant is entitled to its costs in relation to its response to those objections.  I do not consider the applicant in effect surrendered to the relevance of the earlier strike out application and objections in making its applications to amend. 

199               However, I am similarly not satisfied that the applicant is entitled to have a costs order on the respondent's earlier strike out application.  It seems to me there was sufficient notice of that application in large part becoming irrelevant by reason of the notice of motion to amend and the specific objections taken to the proposed amendments to the application and the statement of claim.

200               In those circumstances, as foreshadowed above, I would order that the respondent pay the applicant's costs of the notice of motion to amend the application and the statement of claim to be taxed, if not agreed.

201               While the Court may in appropriate circumstances order that costs on an interlocutory proceeding be taxed and paid forthwith, I do not consider that the circumstances here justify such an order.  As indicated above, in relation to the claim that the costs be taxed on an indemnity basis, I do not consider that the objections taken to the conversion of the proceeding to a representative proceeding or the objections taken in respect of the amended application and the amended statement of claim to have been so lacking in substance that such an order ought be made.  Similarly, I do not consider that there is any case made out for the early payment of assessed costs.

Conclusion and orders

202               For the reasons above, I would allow the applicant's notice of motion filed 18 May 2009 and formally dismiss the respondent's notice of motion filed 4 May 2009.

203               While there may be issues concerning the extent to which the relief claimed may be available to the applicant, as claimed, those issues are best left to final argument after trial of the issues.

204               Accordingly, the following orders are indicated:

1.                  The applicant has leave to file and serve an amended application including an application under Pt IVA of the Federal Court of Australia Act 1976 (Cth) in the form annexed to the affidavit of Idris Mark Owain Matthews sworn 19 May 2009 and filed in support of the notice of motion filed 18 May 2009.

2.                  The applicant has leave to file and serve an amended statement of claim in the form annexed to the affidavit of Idris Mark Owain Matthews sworn 19 May 2009 and filed in support of the notice of motion filed 18 May 2009.

3.                  The respondent pay the applicant's costs of and incidental to the applicant's notice of motion filed 19 May 2009.

4.                  The respondent's notice of motion filed 4 May 2009 is dismissed.

5.                  Each party is to bear its own costs in relation to the dismissal of the respondent's notice of motion filed 4 May 2009.

205               I will, however, hear from counsel as to the final terms and form of the orders to be made.

Associate:

Dated:         23 June 2009